Why JD, Alibaba, Nvidia, and Facebook May Have Further To Fall
Michael Kramer and the clients of Mott Capital own shares of TSLA
Perhaps the only thing worse than having a stock that is going lower is being in denial while it is going lower. Seriously, investors get so attached to their stocks and so emotional that it can cloud their judgment. The other biggest mistake I find investors make is not understanding or at least having open-mind of the short-thesis for the stock. Understanding why someone is shorting the stock you hold so close to your heart is perhaps more important than understanding why you own it.
So two tips
1) Do not get emotionally tied, or let emotions dictate your thinking
2) Understand the opposite sides viewpoint, whether you agree or not.
JD is one such example. The stock has been hammered, and the stock is nearing a critical level of technical support at $25.40. And while you can argue that the stock is already down, it could still have much further to go. Yeah. In fact, should the stock break technical support at $25.4, guess what, it is going lower, to perhaps $22.3. That is where one can find an unfilled technical gap.
Fundamentally the stock is broken as well. Notice the price of the stock’s decline of about 46 percent, and the amount the earnings estimates have been slashed. Nearly identical amounts. So you ask why is the stock falling? Look no further than the earnings estimates. When will the stock rise again? When earnings bottom, and beginning rising again.
Next is Alibaba which is in a very similar scenario. Earnings estimates are also falling. The further estimates fall, the more likely the stock follows them lower.
Alibaba’s chart is no different, and is heading towards $151.60.
If you look at Amazon it is the opposite with earnings estimates exploding higher. Estimates for 2019 and 2020 are climbing by more than 70 percent.
So sometimes the best way to figure out why a stock may be rising or falling is by looking at the trend in estimates. Is it always a perfect system? Of course not, but it is a quick way to get a handle on why something may be falling and knowing if the stock has even further to fall.
Tesla has surely been on many investors minds lately. The big question is which way the stock will go. Technical the stock fell below that support level we had watched. Admittedly this was not the way I thought the stock would go when I wrote Tesla was nearing a tipping point. But the good news, is that the stock fell to technical support around $250.
Right now resistance comes around $300 again.
Nvidia looks like it could be heading to the lower side of its trading channel back towards the low $250’s.
Facebook is also at a key support level around $159. A drop below support send the stock lower to $148.
Again, follow the trends in Facebook’s earnings, which are getting slashed.
Here’s our video from Friday. Breaking Down Micron.
Michael Kramer is the Founder of Mott Capital and the creator of Reading the Markets.
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.
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